A Firm Is Required to Estimate a Liability for Repairs

question 148

Multiple Choice

A firm is required to estimate a liability for repairs for products sold with a warranty.If the firm's accountants later find that the estimated amount for repairs has been overstated,the correct accounting procedure is to

• A)make an adjusting entry to reduce the amount of estimate.
• B)make a correcting entry because the overstatement is an error.
• C)show the amount of overstatement on the income statement as a loss.
• D)do nothing for the year in question and modify the next year's estimate.

---

Definitions:

Modernity

The quality or condition of being modern, often associated with cultural and economic developments in society following the Age of Enlightenment.

Social Change

The alteration over time in behavior patterns, cultural values, and norms of a society.

Cultural Diffusion

The process by which cultural beliefs, practices, and items spread from one society or culture to another.

Technological Determinism

The theory that technology is the principal factor driving societal changes and shaping societal structure and cultural values.